DEFINITION of 'Upside'

Upside is the forecasted dollar amount or percentage increase in the price of an investment, and it can be determined using several forms of analysis. Analysts used either technical analysis or fundamental analysis techniques to predict the future price of an investment, particularly stock prices. A higher upside means that the stock has more value than is currently reflected in the stock price.


Fundamental analysis evaluates the upside price of a stock by considering the ability of the firm to generate sales and earnings and to make smart decisions about company assets. Businesses can increase sales by moving into new markets or by adding a product line. Companies that manage their costs well and can increase their profit margins have a higher upside. Money managers that use fundamental analysis also consider how effectively a business uses assets to generate sales and profits.

Factoring in Technical Analysis

Technical analysis is a method that considers the historic patterns in the price of a stock and in the trading volume of a security. Technical analysts believe that price movements are trends, and these managers use charts to determine the upside in a stock’s price. A breakout, for example, occurs when a stock price trades above a recent price trend. If XYZ stock has been trading between $20 and $25 per share, for example, a price move to $28 is a breakout, which is an indication that the stock price has an upside above $28.

How Upside Capture Ratio Works

Upside is also a concept that is used to judge the success of a portfolio manager’s performance when compared to a benchmark. For many mutual funds, the investment objective is to outperform a specific benchmark, such as the Standard & Poor’s 500 index. The upside capture ratio indicates how much upside the mutual fund captures when compared to the benchmark. Ideally, an investor wants a mutual fund that captures 100% or more of the benchmark’s upside gains with a lower level of risk.

Examples of Short Selling

Short selling refers to selling stock that the investor does not own, and the seller must delivered borrowed securities to the buyer by the settlement date. Eventually, the short seller must buy the shares to cover the short position, and the seller’s goal is to buy back shares at a lower price. Short sellers look for stocks that have reached an upside, which means that the stock is forecast to decline in price.